Commission on Security and Cooperation in Europe

Testimony :: Dr. Veselin Vukotic
Professor - University of Podgorica School of Economics

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DR. VESELIN VUKOTIC

Professor, University of Podgorica School of Economics

President, Institute for Strategic Studies and Prognosis (ISSP)

Podgorica, Montenegro

TESTIMONY

U.S. Commission on Security and Cooperation in Europe

(Helsinki Committee)

Washington, DC - February 1, 2000

Good morning. Mr. Chairman, honorable members of Congress, thank you for holding this important hearing, and
thank you for giving me the opportunity to speak on the subject of promoting democracy in Montenegro.

We in Montenegro believe that the most efficient way to avoid new conflict and to develop permanent democracy
is through complete reform and reconstruction of our political and economic system. However, reconstruction is
needed not just of our economy, administration and state, but also of our mentality. Our principal problem lies in
how our society thinks--how we understand and solve problems.

Unfortunately, the Balkans still suffers from closed society. Our society requires more freedom and less
dictatorship, more rules of the game and less secret decisions, more personal responsibility and less dependence
on the state for solving personal problems.

This reconstruction of the Balkan mentality is more than just a philosophical idea. It is the practical starting point
for our reform. For Americans, the philosophy of open society is understood: respect for success, mobility of
people, the free market, and democratic government. You have had this philosophy since 1776. There is no need
for Americans to discuss it.

Montenegrins, however, must discuss it. Our key problem is overcoming our fear of open society, open
economy--overcoming our fear of globalization. On this point, we are more irrational than rational at the moment.

In order for Montenegro to begin changing our mentality, we must build a new economic system based on private
property, economic freedom, and the development of entrepreneurship. We have already started this process,
and we are getting closer to an American-style free market system, rather than the so-called "social market"
system of Europe or the state-controlled system in Russia.

We are very grateful for the assistance we have received from the United States in helping us begin our reform
efforts. Indeed, we could not have done it without you. However, much more reform is needed.

Our economic reforms so far have focused on three areas:

2. Complete, transparent privatization of state ownership;

3. Monetary reform and financial system reform;

4. Economic sovereignty from Yugoslavia.

I would like to provide you with a review of what we have accomplished so far in these areas, and then discuss a
vision for Montenegro and how the United States can help us achieve that vision.

Transparent Privatization

Our viewpoint is that everything must be privatized. There must be no area in which the state controls property.
Transparency is fundamental to our privatization process. Without transparency, there can be no opening of
Montenegro to the world, no American and European business, no American and European tourists.

So far, Montenegro has privatized 25 percent of total state capital. The remaining 75 percent of state capital we
will privatize through two basic methods:

1. The Mass Voucher Privatization (MVP) program.

2. The sale of state-owned businesses through international tender.

We are conducting the MVP program with the help of USAID and the Barents Group, and it should be complete
by the end of June 2000. Under this program, citizens receive vouchers from the Montenegrin government free of
charge, with which they can purchase private shares in formerly state-owned companies.

In addition, we view privatization as an ideal opening to the international community. We have begun the process
of selling our largest companies to strategic commercial partners from around the world. Our goal is to have major
international corporations invest their capital in Montenegro. We are preparing to publish tenders for
Elektropriverda, the electric company, Telecom of Montenegro, the tobacco company Duvanski Kombinat, the
oil company Jugopetrol, and a few hotels.

Our motto is, "We are not selling our companies, we are buying good owners."

We are working with a number of American and international firms and organizations to assist us in our
privatization effort. In addition to USAID and the Barents Group, and the Center for International Private
Enterprise (CIPE), we are working with the Know How Fund, the Hong Kong-Shanghai Bank, Credit Ainstalt
Investment Bank, Raiffeisen Investment Bank, Deloitte and Touche, Price Waterhouse Coopers, the Open
Society Fund, the European Union, and several other organizations.

Monetary and Financial System Reform

A precondition to privatization, of course, is monetary reform. We are aware that without stable currency, there
can be no foreign investments, no foreign companies. For the moment, we have introduced a double currency
system, the dinar-deutsche mark (DM) system. Within a few months, I expect the DM will be our only currency.
We do not wish to create our own Montenegrin currency. Rather, we are hoping to adopt the euro as as soon as
possible.

Montenegro does not wish to be a country that solves its monetary problems through printing money. We are
creating the conditions necessary for solid, stable monetary policy through the reform of the financial system.
Working with experts from USAID, the European Union, and analysts from CIPE and my NGO ISSP, we are
developing a plan for a complete legal restructuring of the financial system in the following areas:

· Reform of the tax system;

· Reform of the pension system;

· Reform of the statistical system;

· Reform of the foreign trade system;

· Reform of the budget and budget administration;

· Reform of business environment;

· Provision of foreign investments guarantees;

· Reform of the law on banks;

· Reform of commercial law codes.

In all of these efforts, we are very grateful for the continued support of USAID, the European Union, and the
Know How Fund. As I said before, we could not do this without them.

Economic Sovereignty from Yugoslavia

Our objective for Montenegro is to achieve complete economic sovereignty from Yugoslavia. What do I mean by
that? Economic sovereignty means that the Montenegrin parliament should have complete authority to pass laws
and create a legal and institutional framework for a free market economy.

We Montenegrins don't have a time to wait for Mr. Milosevic to resign. The question of his resignation is not
Montenegro's problem. It is Serbia's problem. If the citizens of Serbia choose Milosevic as their president, then
good luck to them. Serbia's votes are not Montenegro's concern.

I cannot ask my three children to wait for Milosevic to resign for two reasons: (1) I don't believe that he will resign
soon, at least not for a few years, and (2) Who will come after him? A new Milosevic, or something else?

Who can ask my three children to wait for their economic and political freedoms?